Very few predicted when Apple Pay was announced that it would turn the payments market on its head and, yet despite attempts by US retailers to curb its popularity, it is already making its presence felt.
The plethora of mobile payments initiatives launched over the past three years have hardly made any impact with the exception, perhaps, of m-Pesa. Any attempt to exclude the established card issuers and their extensive merchant networks in developed economies was always going to find the going but that didn’t stop the likes of Google Wallet and Isis (now known as Softcard) with all the might of their respective partner organizations in tow.
Even when they enlisted the support of the card issuers, they couldn’t build up enough steam to attract the masses needed to support any high volume, small margin business like payments.
The Google Wallet service has been rolled out across most Android phones and makes use of the HCE NFC Tap and Pay service Google offers with all Android handsets. Customers can even use Gmail to send money to their friends and family quickly and easily, and they have even been issued with a physical card (who knows why) to supposedly help with money management.
Yet, despite a steadily growing (if not stellar) user base, Google has opted to pull the ability for merchants to sell digital goods using its Wallet platform. This will hardly encourage new users, or online merchants, surely?
What they all seem to forget is that replacing a thin, small piece of plastic with a mobile phone fitted with NFC chips is not reason enough for most people to rush over. Expecting them to sign up to yet another system, vendor, supplier and link existing credit cards, bank accounts and personal information to a third party that may or may not be around in a few years is sheer madness.
Apple Pay dispensed with all that rubbish and by using the user’s thumbprint for security at point-of-sale and adding payment card options using nothing more than the iPhone’s built-in camera, it has overcome almost all the stumbling blocks for users.
By utilizing, even exploiting, the token security systems already developed by the card issuers it immediately got them on side thus opening up their complete merchant networks. Everybody benefits, and the extra security will probably save the industry billions of dollars each year.
So simple, isn’t it? In retrospect one has to ask why nobody else came up with the idea. Sure, Apple built up slowly to this point acquiring the thumb scanning technology and testing it extensively before teaming it up with another well-tested application, Passbook, to form the basis of Apple Pay.
This does not mean Apple has a monopoly on the mobile payments market, after all, people have to buy the latest iPhone to benefit from Apple Pay fully. Android-based competitors like HTC have already started acquiring or developing similar thumb scanning technology to team with existing NFC capabilities, but they still have to get the card issuers onside and introduce token security. Their devotees will also have to buy new Android devices to get all these features so Apple will have a head start and not be disadvantaged by being the first.
The underlying question behind all mobile payments schemes is why the desire to get involved in such a complex minefield in the first place. Perhaps it stems back to age-old argument about who owns the customer, and the supposed value of that ownership no matter how transient. Apple has historically, by re-engineering complete eco-systems such as music, mobile devices and app distribution, taken ownership of the customer in some way. Is Apple Pay designed to do the same, despite its revenue earning capacity looking rather limited?
If you have had the experience of using Apple Pay you will understand why it could possibly become the defacto standard for all future mobile payment models. Simplicity, once again, triumphs over complexity. Apple, once again, takes the initiative by mixing security with simplicity and style. Not everybody will be pleased, especially Android lovers, but it’s now up to them to come up with something better, simpler and cheaper. Good luck.